The softer side of analytics

Walking around the A2011 conference in Orlando I find myself surrounded by analytical talent--and I wonder, do all of these people know how important and valuable they truly are?

Gene Grabowski Jr. from Ford Motor Credit and Denise McManus of the University of Alabama confirmed for me that what is truly critical to gaining a return on analytics investments is having good talent.

When you are considering bringing a more analytical approach to your organization, the first thing you’ll be asked for is an estimate of the ROI. Any vendor will happily supply you with a list of case studies with enticing headlines: “Churn rate decreases 40 percent.” “Revenue increases 10 percent.” “Product costs drop 50 percent."

But the real benefits of analytics might not always come with a neatly wrapped ROI figure. 

As business analytics Author James Taylor has noted in this Exchange, increasingly analytics is about incremental change, or what he terms “microdecisions.” It is not the “Ah Ha” moment that saves the firm millions of dollars. It’s the changes you make to the supply chain as your forecasting sees a downturn in demand. It’s the increased efficiency of analysts whose boss is no longer begging for new positions every six months. And it is development of customers whose loyalties can be measured in dollars and cents over years – not one quarter.

But making those changes requires more than technology. The nature of an analytics investment requires a psychological and organizational effort that is ongoing. At the Analytics 2011 conference, Mr. Grabowski shared with us how Ford Motor Credit has worked intensively on creating an Analytic Center of Excellence to maximize the most important analytics investment of all: its human capital.  Ford Motor Credit has established a central hub for analytics to create a true analytical culture, including an analytics department, business liaisons and IT.

According to Denise McManus, the University of Alabama is preparing for the shortage in analytical talent by heavily enhancing their academic program around business analytics, working closely with the private industry (including Ford Motor Credit). It was clear from the ensuing debate and questions from the audience that there is no single magic approach to establishing a COE: It depends on your current business and culture, but certainly agreement that addressing the softer side of analytics is important.

My take-away: As you build your case for an analytics solution, think about the long-term and incremental ROI that comes from doing things better, smarter and faster. Ask yourself this: How can analytics impact the company’s bottom line not only this next quarter - but how will those returns continue to multiply over the next year and the next decade?

tags: analytics 2011

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